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Monday, 24 February 14
DRY BULK MARKET TO IMPROVE OVER THE COURSE OF 2014, BUT OVERSUPPLY STILL AN ISSUE SAYS BIMCO'S CHIEF SHIPPING ANALYST
As a gruelling first quarter edges closer to the end, dry bulk ship owners are looking at an improved second quarter demand, which, coupled with slow steaming and other cost saving measures, will lead to the market's rebound. Speaking with Hellenic Shipping News Worldwide in an exclusive interview, BIMCO's Chief Shipping Analyst, Mr. Peter Sand, noted that lower freight rates over the first couple of months of 2014, were to be expected, but as 2014 moves forward, things will begin to improve. "On the average freight rates levels we have already seen 2013 was better than 2012. BIMCO expect 2014 to become better than 2013 in that sense", Sand said. But, oversupply is still an issue, while demolition activity is expected to be lower this year, on the back of improved freight rates.
Since the start of 2014, dry bulk rates have plunged close to the level they were prior to last year's rally. Is this development attributed solely on low seasonal demand, or have there been other factors in play as well?
The development in dry bulk rates are more or less in line with BIMCO expectations as expressed in our recent reports on the shipping market. The combination of the strongest Q4 ever on record and the recurring seasonal low demand in Q1 multiplied by the weakness in demand during Chinese New Year always test the market with a downward correction. Sometimes high volatility results in rates undershooting when a new lower balance is settling in, this time around is not much different but the rebound is not likely to be especially strong in the short run as can also be seen in the freight rates forecasts that BIMCO has released in early-February for the coming two months.
How crucial has been slow steaming to helping sustain freight rates?
Slow steaming is a very vital tool in today’s markets. Without that, the full force of oversupply would weight heavy on the rates, causing miserable returns on investments.
Most recently, the combination of a slower pace of newbuilding tonnage flowing into the market and widely applied slow steaming has lifted earnings.
The way back to an improved utilization of the fleet is paved with patience and “supply management”. The latter includes keeping slow steaming around, continue the scrapping of the less efficient part of the fleet, making retrofits/repairs works now rather than later, an carefully considering the future expansion of the fleet.
In this sense, it is important to remember that slow steaming has a larger impact on the supply side as compared to demolition, but the temporary nature of slow steaming makes it all more volatile as the market conditions improve.
In its recent report, BIMCO reiterated its view that, beginning April and throughout the remainder of the year, the dry bulk market's prospects are rosier, at least demand-wise. Why is this?
A lot of seasonality plays into this forecast. If you e.g. look at exports of iron ore out of Brazil and Australia the pace and volumes increase throughout the year as it progresses – with Q1 being the low quarter. Demand for steam coal and iron ore is expected to rebound during Q2. Moreover, BIMCO do not expect the support from grains to kick in before we enter Q3 and Q4. This is how we expect 2014 will play out on the big scale.
Do you expect the recovery scenario to fully materialize over the course of the year, in terms of freight rate levels and how sustainable will this rebound be?
We see a winding and potentially long road back to a fully sustainable market where the fleet is once again steaming at “new normal” service speed also on the ballast legs to some extent. Our “new normal” service speed is one that is lower than the norm of the past decade – due to higher bunker costs, increased fuel efficiency and the fact that slow steaming is applied whenever possible. But the way back also holds many “windows of opportunity” where rates will firm and spike as demand picks up strongly or weather-related factors lend a hand.
On the average freight rates levels we have already seen 2013 was better than 2012. BIMCO expect 2014 to become better than 2013 in that sense. But as we are only just about to see the demand side outstripping the supply side, following multiple years of the opposite, the fundamental market balance is also likely only to improve slowly and bring around higher levels of fleet utilization. Going forward BIMCO expect higher volatility as the market get tighter.
Is the supply overhang alleviated at the moment, compared to a year ago?
We have to consider slow steaming an integral part of our industry to handle the oversupply and improve industry economics. The overhang has come down over the past half year, but we still estimate oversupply of 20-25%.
Are you worried about the level of newbuilding ordering over the past year, a dynamic which has spilled over into 2014, even more aggressively?
As regards to the placing of new orders, I am confident that the individual industry players knows exactly what they are doing. Nevertheless, if you look at it from a pure industry point of view you could argue that if there is an overhang of capacity you should scrap more vessels than enters into the active fleet in order to bring back a balance – but that’s not how it works.
In terms of demolition activity we've seen a drop over the past few months, as owners found it more financially wise to retain or resell their older vessels. Will this trend change, or will we see a substantial drop over the course of 2014, thus offsetting the rise in demand?
There is no real big surprise in the recent development and we rely on the trend to go on. BIMCO expect 14m DWT to be scrapped in 2014, this a drop of 33% as compared to 2013. When rates go up – fewer chose to cut capacity. The increased in secondhand prices too, spells it out – a resale is much more likely than a sale to cash buyer. It also tells us that more buyers than sellers are in the market now. This is pushing prices up. Different types of ships, in size, gear, draft and operational capabilities simple cater for different demand. This is why ships are not sold for demolition due to the age criteria only.
Taking into account the aforementioned development in terms of tonnage supply, do you think that the projected recovery this year could be shortlived, or is there "enough gas in the tank", to see the market up the hills of 2015 and 2016 newbuilding deliveries?
Our supply forecast for 2014 and 2015 certainly looks manageable. Any additional new orders can still absorbed by yards for 2016-2017 delivery without jeopardizing the recovery. BIMCO do not see the improving trend derailed by anything that we can see in the market today. Only unforeseen major game changers can do that. Even though China is slowing down and transforming its economy toward a higher dependency on services (rather than manufacturing) and private consumption, we trust a soft landing will continue to support the dry bulk market.
Will the market ever shake the effect of China in cargo demand, at least offset it, through the rise of other countries in dry bulk trade? If so, which countries could those be?
China is the elephant in the dry bulk room. The wise buyer of commodities at the right prices and heavy weight player providing the market with massive amounts of demand. China means the world to dry bulk shipping and the nation holds the key to a strong market going forward. We have not seen a single nation being so dominant in the global market before and I doubt we will see something like this duplicated in the near term perhaps never. It is natural to mention India in this context, as the nation holds a giant potential as an importer but also as an exporter of dry bulk commodities. However, it would be premature to compare the two nations today to forecast the development of India, as they are fundamentally very different.
Source: Nikos Roussanoglou, Hellenic Shipping News
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Thursday, 08 May 14
'TRIAL BY MEDIA, TRIAL BY LAW' - A REPORT FROM TRACK 1 OF BIMCO'S ANNUAL CONFERENCE DUBAI 2014
KNOWLEDGE TO ELEVATE
Aiming to bring a very different type of event into their annual conference, BIMCO presented ‘Double Jeopardy &n ...
Thursday, 08 May 14
INDONESIAN COAL PRICE REFERENCE IN MAY CRASHES THROUGH $74
COALspot.com - The Ministry of Energy & Mineral Resources of Indonesia has revised down again the coal bench mark price by US$ 1.21 / MT to ...
Wednesday, 07 May 14
THE DRY BULK MARKET HAS NOTED ANOTHER WEEKLY POSITIVE GAIN
Chartering (Wet: Softer- / Dry: Stable+)
The Dry Bulk market has noted another weekly positive gain, driven by the Capesize segment, but we ne ...
Wednesday, 07 May 14
SGX ENHANCES ITS COMMODITIES PRODUCT OFFERING
COALspot.com: SGX is building up its bulk commodity product offerings with 9 more derivative contracts over the next 2 months, subject to regula ...
Tuesday, 06 May 14
NEWCASTLE COAL EXPORT SLIPS 7.92% WEEK ON WEEK
COALspot.com: In the week ended 07:00 hours 5 May 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland ...
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- McConnell Dowell - Australia
- Manunggal Multi Energi - Indonesia
- Meenaskhi Energy Private Limited - India
- Kideco Jaya Agung - Indonesia
- Medco Energi Mining Internasional
- Therma Luzon, Inc, Philippines
- Indogreen Group - Indonesia
- Eastern Energy - Thailand
- Ind-Barath Power Infra Limited - India
- Iligan Light & Power Inc, Philippines
- Deloitte Consulting - India
- Jindal Steel & Power Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Petron Corporation, Philippines
- Planning Commission, India
- Globalindo Alam Lestari - Indonesia
- Makarim & Taira - Indonesia
- Australian Commodity Traders Exchange
- Formosa Plastics Group - Taiwan
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- Xindia Steels Limited - India
- SMG Consultants - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Vedanta Resources Plc - India
- Indika Energy - Indonesia
- Indonesian Coal Mining Association
- TeaM Sual Corporation - Philippines
- Binh Thuan Hamico - Vietnam
- Kobexindo Tractors - Indoneisa
- Borneo Indobara - Indonesia
- Madhucon Powers Ltd - India
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- Africa Commodities Group - South Africa
- OPG Power Generation Pvt Ltd - India
- Mercuria Energy - Indonesia
- Commonwealth Bank - Australia
- Electricity Generating Authority of Thailand
- Australian Coal Association
- Anglo American - United Kingdom
- Carbofer General Trading SA - India
- Bukit Baiduri Energy - Indonesia
- Star Paper Mills Limited - India
- Indo Tambangraya Megah - Indonesia
- SMC Global Power, Philippines
- IHS Mccloskey Coal Group - USA
- Independent Power Producers Association of India
- PNOC Exploration Corporation - Philippines
- Ministry of Mines - Canada
- Siam City Cement PLC, Thailand
- The University of Queensland
- Simpson Spence & Young - Indonesia
- Interocean Group of Companies - India
- South Luzon Thermal Energy Corporation
- Barasentosa Lestari - Indonesia
- Kartika Selabumi Mining - Indonesia
- The Treasury - Australian Government
- Samtan Co., Ltd - South Korea
- Electricity Authority, New Zealand
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- Toyota Tsusho Corporation, Japan
- Indian Energy Exchange, India
- Essar Steel Hazira Ltd - India
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- PetroVietnam Power Coal Import and Supply Company
- Posco Energy - South Korea
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- Minerals Council of Australia
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- Dalmia Cement Bharat India
- Global Coal Blending Company Limited - Australia
- Parry Sugars Refinery, India
- Sical Logistics Limited - India
- Sinarmas Energy and Mining - Indonesia
- Rio Tinto Coal - Australia
- VISA Power Limited - India
- Kapuas Tunggal Persada - Indonesia
- Kumho Petrochemical, South Korea
- Aditya Birla Group - India
- Karbindo Abesyapradhi - Indoneisa
- CIMB Investment Bank - Malaysia
- Sakthi Sugars Limited - India
- GMR Energy Limited - India
- Wood Mackenzie - Singapore
- Singapore Mercantile Exchange
- Agrawal Coal Company - India
- Larsen & Toubro Limited - India
- Riau Bara Harum - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Bukit Makmur.PT - Indonesia
- Latin American Coal - Colombia
- Price Waterhouse Coopers - Russia
- Power Finance Corporation Ltd., India
- Metalloyd Limited - United Kingdom
- LBH Netherlands Bv - Netherlands
- Alfred C Toepfer International GmbH - Germany
- Bhushan Steel Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Eastern Coal Council - USA
- Energy Development Corp, Philippines
- Edison Trading Spa - Italy
- India Bulls Power Limited - India
- Bayan Resources Tbk. - Indonesia
- Chettinad Cement Corporation Ltd - India
- Maheswari Brothers Coal Limited - India
- Parliament of New Zealand
- Bahari Cakrawala Sebuku - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Kepco SPC Power Corporation, Philippines
- Georgia Ports Authority, United States
- Pipit Mutiara Jaya. PT, Indonesia
- ICICI Bank Limited - India
- Mintek Dendrill Indonesia
- Banpu Public Company Limited - Thailand
- Holcim Trading Pte Ltd - Singapore
- Maharashtra Electricity Regulatory Commission - India
- Global Business Power Corporation, Philippines
- Ministry of Finance - Indonesia
- GAC Shipping (India) Pvt Ltd
- Uttam Galva Steels Limited - India
- Gujarat Electricity Regulatory Commission - India
- Lanco Infratech Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Heidelberg Cement - Germany
- Vizag Seaport Private Limited - India
- Intertek Mineral Services - Indonesia
- Orica Australia Pty. Ltd.
- TNB Fuel Sdn Bhd - Malaysia
- Indian Oil Corporation Limited
- Semirara Mining Corp, Philippines
- Grasim Industreis Ltd - India
- Mercator Lines Limited - India
- New Zealand Coal & Carbon
- PowerSource Philippines DevCo
- Offshore Bulk Terminal Pte Ltd, Singapore
- Rashtriya Ispat Nigam Limited - India
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- Chamber of Mines of South Africa
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- Bangladesh Power Developement Board
- Sarangani Energy Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Malabar Cements Ltd - India
- Salva Resources Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Coalindo Energy - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Standard Chartered Bank - UAE
- Wilmar Investment Holdings
- Bukit Asam (Persero) Tbk - Indonesia
- Goldman Sachs - Singapore
- London Commodity Brokers - England
- Bank of Tokyo Mitsubishi UFJ Ltd
- San Jose City I Power Corp, Philippines
- Videocon Industries ltd - India
- Bulk Trading Sa - Switzerland
- Vijayanagar Sugar Pvt Ltd - India
- European Bulk Services B.V. - Netherlands
- Economic Council, Georgia
- Directorate General of MIneral and Coal - Indonesia
- Merrill Lynch Commodities Europe
- Jorong Barutama Greston.PT - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Pendopo Energi Batubara - Indonesia
- Straits Asia Resources Limited - Singapore
- Altura Mining Limited, Indonesia
- Global Green Power PLC Corporation, Philippines
- Sojitz Corporation - Japan
- Trasteel International SA, Italy
- Coastal Gujarat Power Limited - India
- Jaiprakash Power Ventures ltd
- Port Waratah Coal Services - Australia
- Coal and Oil Company - UAE
- Siam City Cement - Thailand
- Sree Jayajothi Cements Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Thai Mozambique Logistica
- Bhoruka Overseas - Indonesia
- The State Trading Corporation of India Ltd
- Semirara Mining and Power Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Energy Link Ltd, New Zealand
- Meralco Power Generation, Philippines
- Central Java Power - Indonesia
- Antam Resourcindo - Indonesia
- Central Electricity Authority - India
- Marubeni Corporation - India
- Aboitiz Power Corporation - Philippines
- Mjunction Services Limited - India
- ASAPP Information Group - India
- White Energy Company Limited
- Ambuja Cements Ltd - India
- International Coal Ventures Pvt Ltd - India
- CNBM International Corporation - China
- Karaikal Port Pvt Ltd - India
- Baramulti Group, Indonesia
- Ministry of Transport, Egypt
- PTC India Limited - India
- Orica Mining Services - Indonesia
- Attock Cement Pakistan Limited
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Bhatia International Limited - India
- Bharathi Cement Corporation - India
- Directorate Of Revenue Intelligence - India
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- Tamil Nadu electricity Board
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- Renaissance Capital - South Africa
- SN Aboitiz Power Inc, Philippines
- Krishnapatnam Port Company Ltd. - India
- Romanian Commodities Exchange
- Oldendorff Carriers - Singapore
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